Jon (00:00:01) - To be really good at financial modeling, you have no choice but to learn the operations of the business cuz you're modeling the operations of the business and the financial output of the operations.

Ariana (00:00:20) - Welcome to Secret Ops, the podcast uncovering the world of business operations. One episode at a time. I'm your host, Arianna Cofone, and today's guest is Jon Blair, fractional chief financial officer and founder of Free to Grow CFO. Today on Secret Ops, we're gonna jump into the world of financial operations and we're gonna break down what goes into creating and building the financial baseline of a business. And Jon comes from the lens of consumer product goods, and especially being super hands-on and understanding how inventory management feeds into the financial side of the business and how you do management and forecasting. I've really enjoyed our conversation and I truly took away some really important tips to bring into my day-to-day life. So I hope you enjoy. Jon, I am pumped to have you on the Secret Ops Podcast. Thank you so much for joining us. I really appreciate it.

Jon (00:01:19) - I'm super pumped to be here.

Ariana (00:01:21) - So why I'm especially excited to talk to you today is because we haven't dipped into the financial side of operations, and that is exactly what you do as a fractional Chief Financial Officer. But before we get into where you are today and what you're doing with all of your clients, let's talk about your background and how you got here. You know, why do you like financial operations? Why do you like doing this kind of work? Talk us through your journey.

Jon (00:01:45) - Yeah, you know, you might find it, uh, kind of out of place that I would be on an operations podcast, right? But in reality, I am a financial operator, um, at heart. I'm not just a finance guy. And my background is really the reason why I am a very operationally focused CFO. So I started out as a traditional accountant. I went to a business school, got an accounting degree and in accounting school, it's all geared towards becoming a CPA. And I was a staunch opponent of that. I never wanted to become a CPA and go into that world. I wanted to be an entrepreneur, but accounting and finance just spoke to me. So I just followed that thread of interest until I finished business school. And when I finished, the first job that I got I was actually working for a local entrepreneur.

Jon (00:02:41) - He's a guy named Ron Merritt. He ran a company called Merritt International, at one time on the cover of Forbes Magazine. He was this really brilliant electrical engineering background that he had, and he spent a lot of time working in corporate America and was just honestly tired of it. And saw these holes in the market, in the consumer electronics world. And he decided, this is back in 2009, to start a direct to consumer, consumer electronics brand. And he was looking for, he had invented a couple of products that he just found this white space in the market and brought them to market, selling them, sourcing 'em from China and selling them direct to consumer on his website. And he put up a job ad in our business school looking for an accounting person, an accounting slash everything person.

Jon (00:03:28) - And what I found out afterwards is that he needed someone to do the bookkeeping, but he needed someone to just be his right hand. So from day one, I was…controller, I had all these different signatures on my email depending on who I was emailing. I was customer service manager, I was inventory manager, I was logistics manager, I was controller, I was bookkeeper. And so that being the first job right out of college, those were very formidable years for me. I very quickly became an entrepreneurial accountant, which honestly, those two words are not very often put next to each other. Entrepreneurial accountant–

Ariana (00:04:05) - I don't think I've ever heard them put together ever, which is amazing. And it makes total sense actually. It does.

Jon (00:04:13) - Totally. And here's the thing, and, slight tangent, but I'll pull us back into my story. When you talk about an operator, right, an operator is…one definition is the right hand of the visionary founder, right? And so that's absolutely what I was for Ron Merritt. And here's the thing, I was never satisfied after that with taking any sort of traditional accounting and finance role. It had to be super entrepreneurial. And so fate would have it that at the same time when I had just graduated from business school, there was another entrepreneur the same age as me. We actually graduated from the same business school. We just never had known each other. His name's Brian Riley. He had invented a bicycle break that prevents you from flipping over the handlebar. Well, my boss Ron, was a judge in a competition at our business school called Innovation Quest.

Jon (00:05:13) - And it was basically a business plan competition. Brian entered that competition, won it, and got like a $10,000 endowment to start his business. And immediately he needed an accountant. And Ron was like, you gotta meet Jon. And so as fate would have it, Brian is the founder of Guardian Bikes, who if you've kind of fast forward in my career, you know, maybe five years later, I was working as the controller and head of finance at a manufacturing company in Costa Mesa, California. And moonlighting for guardian bikes in the evenings and weekends while we were trying to get that company off of the ground. And ultimately what the plan was, was for me to leave my full-time job once we had the funding or we had the sales and profitability to come on board full-time.

Jon (00:06:04) - Well, the great thing about that period in my life when I was running finance at that manufacturing company was it was a vertically integrated manufacturing company. Meaning all the manufacturing was on site, right? And so as I was running finance and doing cashflow projections and trying to understand profitability, what did it all come back to? It all came back to the movement of inventory throughout the factory. And here's the crazy thing. This company was doing millions and millions of dollars a year in revenue, and their inventory tracking system was just a complete disaster. And so what I found myself as the controller and head of finance doing, I was known as this controller that was never at his desk. People would walk into my office and my seat would be empty. And it's because I was always on the factory floors talking to the receiving guys.

Jon (00:06:52) - I was talking to the machine shop, I was talking to the assembly guys, figuring out the flow of inventory and how labor costs could get attached to the movement of goods, through the manufacturing system. And that was really when, like, as a consumer products operator, that was really when the light bulb kind of went off and I was like, Hey, inventory is everything, right? Inventory is everything for a consumer goods company. It's what we sell and make a margin off of. It's what consumes the most cash when we're talking about purchasing. And so really what that set me up to do, I ended up… along with a few other people in that company, we ended up implementing a brand new ERP system. And through that process, I basically got exposed to how to manage operations and inventory for a manufacturing company from cradle to grave, how to plan on the demand planning side, how that kicks off into reorder policies and how that ultimately backs into purchases that get made.

Jon (00:08:01) - Then how those purchases get fulfilled and how those goods move throughout the factory and the manufacturing system. And so by the time I had cut my teeth there and really gathered all that knowledge, Guardian Bikes, Brian and another co-founder had gone on Shark Tank, did a deal with Mark Cuban, raised the funding to bring me on full-time and brought me on as the head of finance and operations. And it was because both of those guys are very visionary product marketing focused individuals, but neither one of them knew how to run a consumer goods business, nor did they want to. That's not their passion, right? And so they brought me in to run all aspects of finance and operations. Did that for about four or five years. We, uh, we scaled Guardian Bikes from pre-revenue to healthy eight figures over the course of just three or four years.

Jon (00:08:56) - Built the team from the three of us to 20 plus people. And in late 2021, I was just getting the itch for like, what's the next chapter of my career. And doing a lot of soul searching, I realized that my heart lied in, that it lied in that earlier stage growth. Where, you know, you're maybe pre-revenue or you've just kind of broken out into market and you're really trying to figure out how to scale for the first time. I love that stage where there are no systems, there are no processes, there are no tools. Everything's super scrappy, right? And what I did is I was like, you know what? I wanna work with a bunch of visionary entrepreneurs that are in that stage. And so I decided to launch free to grow CFO, back at the beginning of 2022. And effectively the value proposition is we bring fractional CFO services to fast growing consumer brands that have a visionary leaning founder that needs help putting the systems and processes and the visibility in place to make educated scaling decisions. And I've now been doing that for coming up on close to a year and a half. And it's just been a great joy.

Ariana (00:10:12) - Quite an interesting thread here, which is…so we're starting with, accounting, then we go into the entrepreneurial mindset, working with an inventor, seeing kind of like what that brain must be like. I'm sure that that was a lot to wrangle in some ways, potentially. Then you go into more consumer product goods and figuring out, you know, how do we track inventory? How does that threat into supply chain? Again, like working back into operations, it seems like outta curiosity and wanting to make sure that what you're doing makes sense, right? You don't wanna financially model something out that is just based on ideas, but like what you can physically see and touch and understand. There's a tactile learning aspect. And then it's like, all right, I love that part. I love that tangly chaotic part. How can I do that every day, all day? That's where you're at now, quite a through line. Could you have expected that you would've landed here? Cause I think that's a question that some people would assume is like, all right, well, you know, you're going to college, you're learning about accounting and finances. There seems to be a somewhat linear path. It seems like though you've made that path entirely your own.

Jon (00:11:21) - Yeah, I would say I always wanted to be an entrepreneur, but I didn't know what that meant. And I didn't know how or where, or by selling what, I just knew that I wanted to be an entrepreneur. I've always been creative, which I think that that's something that every entrepreneur has, has some level of creativity, you know, in, in their being. That's, I mean, one definition of being an entrepreneur is creating something from nothing that, that someone else sees value in, right? And so, always been entrepreneurial. I would've never guessed in a million years that I would've ever become a COO slash CFO, which was my kind of ending position at Guardian Bikes that I would get so heavily involved in strategic planning and the supply chain management and inventory planning. And then never, ever in a million years thought that I would start my own fractional CFO firm.

Jon (00:12:15) - And deal with the service-based business operational challenges of scaling that. So I honestly just followed, I think you nailed it. I followed my thread of curiosity and I have this burning desire. I will tell you this one thing about me that probably aligns with the curiosity is like, I get bored really fast if like something becomes super monotonous. That's probably why I never wanted to become a CPA. No offense to CPAs, we need them. I have great, good friends from business school that are fantastic and you've gotta, you gotta love the monotony. And there are people who do love the monotony, right? That was never me. And so I honestly follow the thread of getting bored, which then gives me space to get curious about something else. Right?

Ariana (00:13:03) - Yep. That makes sense. Another thing that you said that I wanna highlight, which is you've found a trait in yourself that you're creative. And I think that visionaries or people that start businesses, you know, there is obviously a creativity layer there. You know, we think of founders as being creative. I think operations and, you know, financial side of things. There's not really the oh, they're creative, but actually to do it well, you have to be incredibly creative. Whether that's being creative with resource time, labor tools, data, there has to be a nimbleness in how you think and develop solutions, which entirely requires creativity. Like I, of course you have the foundational building blocks of the knowledge, but most of the time I'm building different solutions for all of my clients cuz it's based on what their needs are, which is different every day. Do you find that too?.

Jon (00:13:58) - Yeah and I would actually even expand that a little bit further and say that I actually think any leader has to be creative, right? And that leader could be a functional leader of an entire department, a unit within the department. Every leader has to be creative because…and I would even venture to say I'm very clear about the distinction between a leader and a manager, right? Managers make sure things get done and leaders definitely have an aspect of management. But leaders get people to buy in and follow them on their own, right? Like make the choice to follow them. And, and all that to say that like whether you are the CEO and founder and you're kind of like the visionary leader. Usually we say visionary leader, we're talking about visionary product leader, maybe market leader, something like that. Strategy leader. But the CFO absolutely has to be a creative finance leader, right? And the COO absolutely has to be a creative operational leader. And, to be honest with you, when you look at the org structure of a typical business with the CEO kind of visionary leaning CEO sitting at the top, they need to draw off the creativity of the executive leaders underneath them to help feed and foster theirs as well.

Ariana (00:15:17) - Totally. It has to have that give and take. Cuz if you have the one person coming up with everything, first of all, you're limited to, to their knowledge and what they know and what they see. But if you have a bunch of leaders who are creative in their specialties and in how they view the world and their experience…way more powerful leadership team in general. So let's talk about fractional CFO work. Fractional is a new word that I think people are adjusting and sort of wrapping their brains around. So can you talk to me about what a fractional leader does and then what your days look like as a fractional chief financial officer?

Jon (00:15:54) - You know, I, I'll start with the fractional CFO piece cuz obviously that's the easiest place for me to start. When I think about…so there are a lot of fractional CFOs, like independent fractional CFOs out there. There are a lot of large firms where I've seen them kind of fail to meet the needs of earlier stage, fast growing businesses is usually one of two things. Either the bigger firms, they just literally every one of those CFOs takes on like 40 clients. They, they just really can't know much about your business. And so they kind of come in unprepared, very out of context and they're just not really helpful. There are some great independent fractional CFOs, but I've had a lot of prospects and clients come to me say like, Hey, there's, there're a finance person and they just said, you know, hire me and tell me what you want me to do.

Jon (00:16:45) - Right? And like we all know visionary CEOs, I would venture to say all of us, but like when you're selling to someone, you have to sell them something specific, right? And so what we figured out and to be completely honest, I messed this up big time at the beginning and I'm still learning. I've only been doing this for a year and a half. I'm by no means an expert. But what I've found, I'm always trying to balance a couple things. One, internally we have to be efficient cause our business has to make a profit, right? In order for us to continue to scale and impact more brands. But we can't just be efficient at the expense of the value we deliver and the experience on our client's side, right? And so we're always trying to find the right way to package our value and our services so we can be efficient, we can make a profit, we can scale, we can impact more brands.

Jon (00:17:38) - But that on the other side, the brand is really filling the value. And here's what we found. What we found is there's kind of these layers of the cake and right, the first layer is oversight of the bookkeeping, right? Previously when we started, we didn't bring bookkeeping in-house. I'm originally an accountant and I know e-commerce, direct to consumer accounting very, very well. But we chose not to bring that in-house because we wanted to really learn the pain points of our clients and understand how to deliver that service well. So we would work with the existing bookkeeping resource that our clients have, overseeing the books, taking a look at it from a CFO perspective and looking and seeing where, where there might be things that are not lining up and the financials. Cuz the financials are a foundation that if they're wrong, I can't give you proper analysis, right?

Jon (00:18:30) - So that's the first layer. But really the bread and butter of what we do is we build out three statement financial projection models and we build out dashboards of our clients' financials so that we can visually see trends and performance. And so on the financial projection side, what we do is we come in and we create projected forward looking P&L balance sheet and cash flow statement. And what we do is we usually get him off the ground using his historical data, but then we sit down with the client, we really learn what's your strategy? What are your plans, what are the decisions that you wanna make, but you're concerned about what will that do to profitability? Will I have enough cash? Can I afford to buy that much inventory? Can I crank up ad spend on Facebook for ROAS?

Jon (00:19:17) - As we build all that into our models and we sit down and we say, Hey, you can, or you can't or you might be able to do that. Here's why. And here's our list of recommendations of like the next steps I think we take to advance your strategy, but heed the warnings that our financial model model is giving us. And then kind of very closely connected with that is we take the way that we look at the financials, the structure that we look at the financials through our model and we plug straight into our client's accounting system and we build dashboards that measure and track the performance of the, that same structure within their actual financials. And what we're able to do there is sit down with the brand and go, Hey, this was our plan. Here's what's actually happening. It's better or worse than what we thought was gonna happen.

Jon (00:20:06) - Here's what we're seeing the gap is or might be. And here's what we're recommending we do based on this. And usually the way that we deliver these insights on the financial modeling, which is forward looking and the financial statement dashboards, which is historically facing, is we deliver all these with an executive summary. We're big on this, we're big on, here's our takeaways, here's our recommendations. CEOs are so busy, right? They don't have time to get into all the weeds. They wanna know. My CFO said, Hey, I'm seeing these five things and I'm recommending these five things, right? And so we deliver that to them in video form and in a executive summary slide deck so they can consume it in whatever form they want to. But then we also have a weekly call and that weekly call is maybe elaborating on those numbers, but I try to only talk about the numbers in those meetings insofar as it informs strategic discussion. We try to focus those weekly meetings on like, here's our strategy, here's where we want to be, here's where we're actually at. How do we close the gap? So it's really overseeing their books. Monthly financial statement dashboards, monthly financial projections and a weekly meeting. And that's how we've packaged it.

Ariana (00:21:25) - Can I just say that I was gonna summarize that and you just did that for me and that's why we're operational minded people.

Jon (00:21:30) - Exactly.

Ariana (00:21:31) - I was like, I was like, alright, I got my then I was like, okay, Jon, got me on that one. Because we're so used to distilling, right? We have to distill these very complex things, you know, it's about getting that process set up then figuring out how you thread that through what you're doing today, how you look at what you're doing in the future, and then distilling that in a way that makes sense based on the experience that you had that you start to bottle up. And, and that's where you're really getting value, which I guess translates well into the trifecta. People, process, tech with like a side or a whole heaping spoonful of data depending upon your role. Let's talk about some, some things that you've learned along the way in each of those categories that our listeners can, can take away and bring into what they do, whether that be their work life or their personal life. So let's talk about tech because I think especially for earlier stage startups, finding the right technology to drive their financial processes makes a world of difference. I've seen like complete spaghetti because you know, they're paying out of Zelle and Chase and it's just been crazy. So when it comes to the financial side, when you're considering technologies, what are you looking at? What are you thinking about?

Jon (00:22:46) - So first off, we only work with companies that use QuickBooks online from an accounting standpoint. And that's primarily because of the stage of where the brands are at the revenue levels. And the thing is that when we're talking small to mid-size business, nobody else does it better. And they've opened up their ecosystem. They've, they've actually created an app marketplace. They've opened up their API, it's really easy to integrate with and they've done a fantastic job of that

Ariana (00:23:22) - Because QuickBooks was a little slow on the uptake. They were very, they were very into their desktop. So you're like limited to the computer that had QuickBooks on it or you had to pay for more licenses. The QuickBooks online that seemed to have picked up speed really quick.

Jon (00:23:37) - Yeah, and it had some limitations at the beginning, that really frustrated my accounting department at Guardian Bikes. It was very limited on the inventory management capabilities. The desktop version had the ability to do like location tracking and to do some more complicated inventory tracking transactions and reporting. But we chose to move even though it was kind of like a nascent product, we chose to move because we knew that they were headed towards opening up their API and there was gonna be a lot more capabilities. And so accounting, it's QuickBooks online, there's so many different applications that you can connect to it from an inventory management standpoint. Inventory planners are really popular one, but there's a, a bunch of others. And because the API is open and fairly easy to work with, if you have some dev resources either contracted or in-house, you can spin something up that talks to QuickBooks pretty quickly.

Ariana (00:24:33) - Also, just a context set for listeners who might not know what an API is, and API is a way that you can get data from different sources. So it can be a platform, it can just be like a pool of data that you're getting access to. And of course they have parameters and permissions around it, but it allows technologists but also just technical people to be able to connect tools together. So you have the data feeding from one thing to another. It pretty much allows operations to happen, in my opinion. Like APIs make the world run.

Jon (00:25:05) - Totally. I mean 100%. And everyone's using different cloud-based applications now, right? Like now that cloud SaaS products are a thing, everyone's using a myriad of different applications, right? And you can get into this hodgepodge of… like at Guardian at one point we're like, man, we use like 15 or 20 different web apps to run this business. And we were on this quest of how to connect it all together. And even more importantly, how do you get the data into a centralized place so you can have a unified view of reporting, right? And there's a lot of cool tools that are coming out that can help with that. Now, some that we used SeeData is a really cool one. You don't need to be a developer and you can connect to just about every popular app out there.

Jon (00:25:59) - You can pull the data into one centralized database and build some analytics on top of it. I'll tell you, the one shortcoming I still see in the marketplace when it when it comes to like tech tools is forecasting, forecasting and planning. It's something I've always been very interested in trying to solve that problem with. With software, there are some tools out there. Causal is one. I'm trying to think of a couple others off the top of my head. There are several financial modeling tools out there and what I've found is that they're great at doing micro forecasts. So like they're great at like just managing a sales forecast or just managing a headcount forecast. But when you try to build a P&L that's connected to a balance sheet that's connected to a cashflow statement, no one's done a great job of that.

Jon (00:26:51) - And so we actually still use Excel. I'm always looking for the next person, the next software company that says they've solved that problem. Everyone I've tried, I'm like, we're just gonna end up using Excel or Google Sheets. Here's why I think that's hard to solve for the market that we play in and the types of brands we work with there early stage and growing. And by nature they're changing all the time. And so like those software applications are really rigid and they're really hard to make changes on the fly. Whereas like Excel, you can move really quickly and what we've done to kind of overcome the shortcomings of Excel. And that would be things like there's not really great data validation or like the ability to protect.

Jon (00:27:47) - There's not great transparency between calculations and inputs and outputs, right? Which is a huge problem. And then the other, the other thing is just like actually having things locked down to where you can only manipulate actual input fields. And so we take a lot of time in our models to make up for that by having very transparent assumption tables, right? And calculations separate, separated from them. And so I will tell you, I'm always looking for the next thing that will solve this in automated fashion. I'm sure it'll happen eventually, but no one's nailed it yet.

Ariana (00:28:27) - Listen, if you're a platform developer and you hear Jon's cry, just like hit him up, I’m sure there's something here. But, but when we talk about the technology side, especially from a financial standpoint, cuz you've got QuickBooks, then you've got these key tools that you're plugging in to help get the inventory access and the visibility that you need for the financial side. When we're talking about sales tools, ultimately the tools do inform processes in a lot of senses, but also we have to define that as well. So how do you go about creating a process that is flexible for the size companies that you work with because they're ever changing, but also putting around those guardrails so it's not just like the Wild Wild West and you're just, you know, everybody's doing everything you know, like how, how do you go about that process?

Jon (00:29:16) - So the way that we think about it, this is actually a philosophy that we're being that I have a operator background, we've got all of our checklists and processes dialed internally as you had imagined, right? Our philosophy is like our job is to create a structure, whether you're talking about the financial statement, analysis, dashboards, or you're talking about our projection model. We create a structure that's standardized across all our clients and we get that off the ground ASAP and get it into our client's hands and start learning about their business. And what's missing from that, because what we found is that like the structure of our models and the structure of our financial statement dashboards, it handles 85% of every question that our clients have. But there's always that 15, maybe 20 depending on the brand where they need to see things slightly different.

Jon (00:30:13) - So our approach is like we templatize everything and we just get our normal standard models and dashboards off the ground and we get them into the hands of our clients ASAP and start talking about them. Because the sooner you start talking about them, the sooner you start hearing what in there is helpful and what's not and what's important to them. And then we iterate on that. And so that is actually a big difference between how some, like by nature CFOs tend to over-engineer things cuz a lot of them were accountants, right? And they try to get everything to tick and tide of the penny. You can't do that when you're growing and you're or stage and you're emerging brand, you've gotta move fast. And so we use the 80/20 rule like a lot and we talk about that a lot because I only need to model or analyze the 20% of variables in the business that produce 80% of the results. I don't care about the other 80 because they're not gonna make an impact. I should only ever care about the 80 if we've truly knocked out the 20 and addressed them all. But every time once you address that 20, there's a new 20 that shows up, right? And so—

Ariana (00:31:21) - That's a good point. That's a very good point

Jon (00:31:22) - So we basically we think about our models and our deliverables, the financial dashboards, we think about it like get the MVP off the ground in one to two weeks, get it off the ground, get it in the client's hand and start talking about it. Cuz then they inform us on what they really need and then when we go sync time back into it, we're sinking time on something we know the client needs instead of building this over-engineered model. And the CEO uses 20% of it and we sunk all that time into nothing.

Ariana (00:31:56) - Also, you know, if you sink too much time in three months you've got a different business, then you're starting to scratch again. That's the hard, I mean that's the hardest part. I find that for myself, I'm constantly chasing my tail a little bit and where I spend my time and energy because you have to move fast. But even moving very, very quickly, you're still always a couple steps behind. Especially with, I don't know, I feel like in the last couple years too, things are moving very fast, like rapid speed, so you have to just hold on tight. Now the people part, it's interesting, I find financial things very interesting. But I'm curious when it comes to the financial side of operations and when you think about people and I think about stakeholders that you've gotta talk to. You've got your leaders, you've got your CEO maybe you've got your COO, you've got your CMO, but you also need to be able to distill that information into other levels, right? Are people interested in hearing the financial information or is it like they're interested to a degree and then they just sorta tune out? What do you find in your experience?

Jon (00:33:02) - Well I would say in terms of all the brands that I work with, they very much care about it. And honestly, there's an art to…you have to think about your audience, right? So that goes with anything. But when you're talking about communicating financial information, even if you're a COO, whatever you need to communicate throughout the organization. You have to think about your audience. What are they thinking about every day? What are they concerned about in the business? What are they responsible for? So like the CEO, you know, it varies slightly. This will be slightly overly generalized, but like the CEO's always going like, are we making money this month? How much are we making? Is that new product that I really wanna launch? Is it on track? Is it on budget?

Jon (00:33:56) - Are we behind on it? That marketing campaign, in that new marketing channel that we, our goal is to scale it up to a million dollars a month, where are we at on that? Right? The CEO is really thinking about that kind of stuff. And so you wanna just deliver the information to that person that backs those things up and gives them insight and gives them my recommendations. I have one of my larger clients, I actually sit in on a cross-functional planning call where we have the inventory replenishment guy there, the VP of marketing and myself. And we're, we're trying to stay aligned on cash flow sales trends and purchasing. When I come to that meeting, we talk about financial information, but we talk about what are our sales trends, cuz that's the driver of replenishment forecasting, what's our cash flow? Because that tells the replenishment guy how much he can afford to buy, right?

Jon (00:34:51) - So it's about bringing the right information to that audience. Let's say I'm sitting in on a board meeting and we're talking about investors. That's super, super high level, right? What's the revenue trajectory? What's the profitability trajectory? It's much more about what does that mean to our strategy and where we're taking the strategy from here, right? They're not really all that worried about the details. They want to know if we're thinking about like, hey, this is what we've done in this last quarter, we're reviewing with you but here's what we learned and how we're improving the strategy going forward. So the short answer is think about your audience. What do they really care about? What are they concerned with? What are their responsibilities? Bring them information that enables them to fulfill those responsibilities at a higher level of performance.

Ariana (00:35:44) - It actually takes a high level of emotional intelligence to translate that too. Because again, business is constantly changing those answers and those needs and those data points and those are gonna be constantly changing and having to understand how can I make the biggest impact in the shortest amount of time is really what you're trying to constantly figure out so that it's also heard, right? If you have all this information that you're sharing, it just gets lost in the noise. So you have to be so conscious of that.

Jon (00:36:13) - Less is more. I have to constantly remind myself of that. Get to the point and get to the point about something that they care about.

Ariana (00:36:21) - Yeah, I definitely do that as well. I hear myself going on a sentence and I'm like, okay, I have to, I've stopped myself mid-sentence cause I'm like, this is too much information, let's move here because the things that we have to care about are multiple levels deep. 90% of the people aren't needing to care about that the way we are. So it's just about like getting to that filtered part and being able to communicate that well and in an engaging way too, right? Like it can't just be boring, it has to be exciting or it has to be interesting or informative. I think this gets into the inside scoop. So we're gonna pick your brain on some of the things that people don't necessarily talk about with operations and especially in the financial lens that would be good to know. And I think the first piece is what do you think people get wrong about financial operations? So you come into a business, you've been hired as a fractional CFO, what do you think people just get wrong that you constantly are having to reframe for them?

Jon (00:37:22) - Yeah, so actually I would say the biggest thing that comes to mind immediately is actually every person in the business should be profitable. And that sounds overly simplified maybe at face value. But what I mean is that, and I think some people go like, okay, well cool, like a salesperson. Super easy to connect them to profitability, right? What about like an admin staff member? Well, where can they save us money, right? Where can they put a process in place that we can scale on that makes us more profitable, right? And so the point being that people who have a direct connection to revenue and people that don't have a direct connection to revenue all need to be profitable. There may be a more subjective, indirect way that you say, hiring this person will make us more profitable. But in reality, every person should be hired to either drive revenue, reduce costs, or advance the strategy or some mix of those. And the mix of those three things should make them profitable. I hear a lot of brand founders though, go like, revenue generating employees are profitable and they need to cover, they need to cover the non-revenue generating employees. Like no, they're all connected and they've gotta either drive revenue, reduce costs, or advance the strategy or preferably a mixture of the three.

Ariana (00:38:40) - That is so well said. I I do a lot of goal setting workshops with people who were founders or CEOs. And when I talk about like, what are your main goals this year? A lot of the time it's a revenue focused goal, which makes sense. But they're missing a whole piece, right? You could be bringing in a ton of money and bringing a ton of clients, but your whole operations is just burning to the ground or you're hiring so many bodies that what you're doing is not scalable and the the focus is more weighted on revenue generating than, you know, cost savings or strategically what's the best thing in this moment? And there needs to be that balance there and there needs to be conversations around discussing those things. Not just one, it's, it's all three at the same time. That was really beautifully said. Jumping into the most difficult part of financial operations. So jump into work mode. I'm like, oh god, this thing's on my to-do list. Like what is that thing? What is the hardest part?

Jon (00:39:44) - I would say unequivocally, it's letting a client know that they need to stop taking so much money out of the business. It's a very widespread problem. And what's challenging is that from a financial statement perspective, most founders that I work with don't pay themselves a salary. So when they take money out of the business, it doesn't show up on the P&L and expense. It shows up on the balance sheet as a distribution. So when you look at the profitability of the business, they may have a 25% net income margin, but they may have taken 27% out in the form of a distribution. And so their P&L they're like, what do you mean I can't take this much money outta the company? I'm, I'm making 25%. And I'm like, you are, but you took out 27 so you actually took out more than the business made.

Jon (00:40:38) - And to make matters worse, all of that profitability is not in the bank account. Some of it is in accounts receivable and some of it is in your inventory. And so that is by far the hardest thing. There's a lot of challenging things, but that's the hardest one is getting owners to wrap their mind around the fact that their compensation is a legitimate expense to the business. And even if it doesn't show up on the P&L…I recommend they put it on the P&L cuz it's a real expense. And if they sold the business, whoever they sold it to would have to pay that salary to someone to run the business. So it's real. But if they won't do that, I at least show them every single month how much they took out relative to the profitability of the business actually had

Ariana (00:41:21) - Woah. That is tough. Oh my gosh. Because you essentially are changing, like that's a big behavioral change too. It's a mindset shift and a behavioral change that ultimately comes down to like the way that they're living their life. Ooh, I'm sure that's been some tough conversations.

Jon (00:41:38) - You're the entrepreneur in this business. You deserve to reward yourself. I'm not trying to constrain you, right? I'm trying to as your CFO tell you what this is doing to the business's ability to grow, right? And we just have to strike a balance between what you take out of the business and what we leave in the business to fund growth. And so what you do, what I've found successful is successful is to come back to like, well what's your goal? Is your goal to grow and exit this thing? If the answer is yes, well then we have to leave some cash in the business and your big cash out's gonna be when we exit. If that's not your goal, that's totally okay. But we can't grow the business like crazy, not sell equity and not take on debt and also take up all this money out of, out of the business.

Ariana (00:42:26) - Whoa. Oh my gosh, that is, I honestly had never even fully thought of that. Cause I'm not so much on the financial side at the level that you are at, but man, that's gotta be super tough. I guess let's, let's flip the script on that then. What is the best part of your day? What is the best part of what you do? Like what is the thing that just brings so much joy to you on a day-to-day basis?

Jon (00:42:51) - Well, I, I'll actually use your husband as an example because I, I work with his company Baronfig. When I get emails from, so here's the thing, our business exists not just to provide fractional CFO services, but I have a heart. I'm a curious, nerdy, lifelong learner and I'm a big believer in sharing what I learn and the content that I consume, podcast books and the like. And so I actually send out emails every single week to my clients with a podcast recommendation or something about a book I just read and a nice little summary of what I learned and a link to go get it. I also buy books from my clients when like it's something I read and I know this client is struggling with that. I'll just send it to them on Amazon and like I've gotten some emails from clients.

Jon (00:43:37) - Your husband, namely is one example of like, Jon, thank you so much for sending me this podcast. I listened to it, it was like the unlock that I was looking for. And so it's like, it's when certainly I get stoked when I help a business turn around. They go from unprofitable to profitable or they achieve their goals and they look back and they reflect and they're like, I can't believe we achieved this. I get pumped on that, but kind of like a really close runner up or maybe right there with it is when I send out content that one of my clients comes back and is like, this was an unlock for me. Cuz ultimately we're fractional CFOs, but we exist to help people. That's like the reason we exist is to help entrepreneurs and that goes beyond just being fractional CFOs. So when I, when I hear someone give us feedback that we helped them either through our services or through our content, it just, I get super stoked about that.

Ariana (00:44:30) - What I really love about that. Also seeing Joey's face when we he gets a Packard from Jon is the best. Cause I'm like, oh, what'd you get? It's like a little, you know, present. I think sometimes especially founders, you know, they are grinding away at their strategy. They're trying to be creative, they're trying to figure out all these things, but sometimes what they need to do is look at something entirely different to shake up their thinking. And so you're essentially disrupting their thought process in a way that allows them to reframe, uh, through different types of media or content. And that's a really smart way of shaking it up. I'm definitely gonna bring that into what I do for sure. Even if it's as silly as like a gift that summarizes a feeling. You know, like there's certain things that just really can drive home or summarize it and give you a different lens to think about things.

Jon (00:45:17) - Well, and another thing I do is I write handwritten cards to our clients when, and, and, and the reason that I'm saying this is because it actually plays in, there's a reason behind it. Me being founder of my own business and being right hand man to the visionary guardian bikes for a number of years, I see very clearly how lonely it it can be to be the founder, CEO. And quite honestly, you're having to spend a lot of time making other people's days so that they'll keep working for you. They'll keep working with you. No one ever tells the founder of, of their own business, Hey, good job. Or, Hey, I see that you're struggling with this and I'm right here with you to help. And the books, the, the podcast, the the handwritten notes I send, I send it because I want them to know that like, Hey, I'm your CFO and I'm here to help. I see what you're struggling with and I'm right here with you and here's something that I think will will help.

Ariana (00:46:13) - Yeah, it's a thing that, you know, my husband having found the business, I've learned how lonely f you know, it can be to be a c e O and how lonely it can be. And this is not to like dramatize it, but it, it is like, you know, the buck stops with you. The decision stop with you. How you motivate your team ultimately ends with you. And I think that's a really good point to make. Um, okay, let's talk about if somebody wants to get into financial operations, they hear your journey, there's something about it that strikes them as a, that could be me. Where do they begin? Where do they start?

Jon (00:46:44) - I would say the most obvious place to start is learn how to build projections, forecasts under, like, that's, that's really the difference between an accountant and a forward looking, you know, kind of fp and a financial planning and analysis kind of, uh, uh, lens on, on finances. But the reason why I say learn how to build projection models is cuz what are they? They are, they are the modeling of the different variables in the business. The headcount, the uh, revenue projection, the cost of goods sold makeup, um, the supply chain costs. Like you have to go dig your talents into the operations of the business to build a financial model. If you do the old classic, just like pull historical financials, trend out the p and l, that's nothing. What made those numbers were people doing things that drove sales, drove purchases, you know, drove the operations of the business. So to be really good at financial modeling, you have no choice but to learn the operations of the business cuz you're just modeling, you're modeling the operations of the business and the financial output of the operations.

Ariana (00:47:59) - That is such a good tip. Would you recommend any course or platform to get started on those things?

Jon (00:48:08) - If someone has an accounting background or finance background? Where I first got, um, kind of introduced to it, I got the CMA certification, which is a certified management accountant. I liken it to you are the forecasting and planning version of a CPA a right. And so if you have an accounting background and you're like, I don't wanna do the CPA a thing CMA all the way, didn't mean to make that rhyme. But, um, now, but then in terms of books, there's a really fantastic book. It is very thick. It took me six months to read. It's very dense, but it's called Financial Planning and Analysis and it's a Wiley, um, it's a Wiley, uh, published book and it literally, it's a handbook that has everything you would want to know and a with a real strong focus on building out projection models. But those are the two things that were really formidable for me as a CMA certification and that that financial planning and analysis book.

Ariana (00:49:07) - Thank you for that. I think other people are gonna find that super helpful too. But let's get to the rapid fire questions because let's learn more about you as a human, um, and you know where you're coming from. So I'm gonna give you these questions, answer it with the first thing that comes into your brain, and if you can't think of anything, we'll just move on to the next one. First one is, what is the best part of your day?

Jon (00:49:30) - Having breakfast with my kids.

Ariana (00:49:32) - Do you have a favorite food for breakfast?

Jon (00:49:34) - Probably oatmeal. I eat it with my two-year-old son every morning.

Ariana (00:49:38) - What is the best purchase you've made under $50?

Jon (00:49:43) - That's a fantastic question actually. These, these knockoff, AirPods,

Ariana (00:49:47) - Love that. What book are you currently reading since you are an avid reader, what are you up to Right now?

Jon (00:49:56) - I'm reading a book called Boutique, which is all about scaling a services business.

Ariana (00:50:01) - What is your favorite place in the world?

Jon (00:50:03) - Catalina Island in California?

Ariana (00:50:06) - If there was a quote that you would say is your favorite, what would that be?

Jon (00:50:10) - That's a good question. You know, what it would be not to let perfection be the enemy of good. I'm really big on MVP and iteration.

Ariana (00:50:20) - Mm. I love that. What makes you little kid happy?

Jon (00:50:25) - Music. I'm a musician. Heavy metal music.

Ariana (00:50:28) - Really? What do you play?

Jon (00:50:31) - I play guitar.

Ariana (00:50:32) - Cool. What is the most important lesson you've learned so far?

Jon (00:50:39) - That I'm gonna make mistakes in everything I do. And that, uh, it's only a failure if you don't learn from it.

Ariana (00:50:48) - Last one, which is, what do you wanna be when you grow up? .

Jon (00:50:53) - I want to be a dad of a bunch of kids.

Ariana (00:50:56) - You're gonna have to start a band. That's all I gotta ask. A heavy metal family band. Jon, where can people find you? They're really thinking about what you're saying and they really want to connect. Where should they find you?

Jon (00:51:11) - Yeah. Website is freetogrowcfo.com And you can find me on LinkedIn. The name, there's Jonathan Blair.

Ariana (00:51:18) - Yeah, we will link that in the description if you wanna connect with Jon. Jon, you're such a pleasure. Thank you so much for sharing just the wealth of knowledge that you have on super complex topics. I I learned many of things and I will be buying that crazy thick book that you recommended. Also, thank you so much to the Secret Apps listeners for listening to the podcast and supporting us. I so appreciate it. Please follow us wherever you find your podcast and check us out@secretops.com. See you next time.